UK wage growth expected to increase but to remain modest

Charles Dumas, chief economist, TS Lombard We expect wage inflation to reach 3 per cent by end-2018, a mild acceleration in nominal terms, rather more in real terms. This assumes either a continued subdued public mood about Brexit or restrictive interest rate action by the Bank of England sooner than expected.
Michelle Lam, senior economist, TS Lombard I expect British workers will get a pay rise of 3 per cent in 2018. It is true that the relationship of wage inflation and unemployment (also known as the Phillips curve) has become less apparent due to globalisation and technological advancement. But I believe demand for hiring could remain rather resilient as firms hope to substitute labour for capital due to Brexit uncertainty. Meanwhile, slower migration from the EU, either due to Brexit or sterling depreciation, would keep the labour market tight. These factors should keep wage growth on a modest uptrend next year.